BOARD MEETING UNDER COMPANIES ACT 2013

UPDATE: on 30^th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

The Board of Directors is most powerful body in a company. The Corporate governance is until now is governance of the Board.

The Companies Bill 2012 has dedicated chapter i.e. Chapter XII dealing with Board meetings and its power.  In this blog I will discuss Board Meetings and in a future post power of Board of Directors.

Meetings (Section 173, Sub – section 1, 5):

First Board Meeting of a company shall be held with thirty days (30 days) of its date of incorporation.

There will be at least four meeting of board of directors every year. This year is not financial year or calendar year. This year starts from next day of its first board meeting. My conclusion is based on my interpretation of term “thereafter”. This is true unless otherwise explained by the government. There shall not be a gap of more than one hundred twenty days (120 days) between two consecutive meetings.

One Man Company with more than one director, small company and dormant company shall have at least one meeting in each half of a calendar year with a gap of at least ninety days in two consecutive meetings.

Participation (Section 173, Sub – section 2):

Directors may participate through:

1. In person,
2. Through Video Conferencing,
3. Other Audio – visual means, as may be prescribe.

Such means must be capable of recording of proceeding and recognising the participation of directors. The government have power to limit use of video conferencing and audio visual means.

This is open for government to prescribe some particular technological platform over other. This may be potential loop holes for corrupt practice in government.

Notice (Section 173, Sub – section 3, 4):

A meeting of Board shall be called by a notice in writing to every director at his registered address send by hand delivery or by post or by electronic means. There is nothing left for explanation by government. This means electronic means may include e – mail, SMS, Direct Massages over Twitter, and such other services using any electronic media platform subject to its registration as registered address but not chatting or notice over webpage of company.

A meeting at shorter notice is possible subject to presence of at least one independent director, if company has one or more.

If company has independent directors, at least one independent director must be present in board meeting otherwise decision taken shall be subject to its circulation to all directors and its rectification by at least one independent director.

Failure to give notice of board meeting attract penalty of twenty-five thousand for officers in default.

Quorum for Board meeting (Section 174, Sub – section 1, 2):

The quorum shall be one – third of total strength or two directors whichever is higher. All directors present in person or otherwise shall be counted.

Continuing director may act for the purpose of counting for quorum or calling a general meeting.

Quorum in case of Interested Directors (Section 174, Sub – section 3):

In case, interested exceed two – third, the number of directors not interested shall be quorum subject to at least two present in meeting.

Absence of Quorum (Section 174, Sub – section 4):

Where a meeting of the Board could not be held for want of quorum, then the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place. There are some state Acts defining National Act but for the purpose of this act National Holidays means national holidays declared by Central government as such.

Passing of Resolution by circulation (Section 175):

The resolution shall be circulated in draft together with all necessary papers to all directors (or members of committee) in same manner as notice. The resolution shall be passed when approved by majority of directors (or members) who is entitled to vote. When one third or more directors require that it must be decided in a meeting, it shall be decided in meeting.

Every resolution passed by circulation must be noted in next board meeting and made part of minutes of that meeting.

Resolution passed in Adjourned Meeting (Section 116):

Where a resolution is passed at an adjourned meeting of the Board of Directors of a company, the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact passed.

Minutes of Meeting (Section 118, Sub – Section 1, 4):

Every company shall cause minutes of the proceedings of every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned in books kept for that purpose with their pages consecutively numbered.

In the case of a meeting of the Board of Directors or of a committee of the Board, the minutes shall also contain—

(a) the names of the directors present at the meeting; and

(b) in the case of each resolution passed at the meeting, the names of the directors,

if any, dissenting from, or not concurring with the resolution.

Secretarial Standard (Section 118, Sub – section 10):

Every company shall observe secretarial standards with respect to Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government.

This blog post is not a professional advice but general information about the subject covered here. I welcome your comments and feedback.